People procrastinate for various reasons, including a lack of confidence and a fear of failure – explaining why so many people put off doing their taxes until the last moment. Preparing and filing your tax returns can be overwhelming, involving a year-long process of keeping an eye on your income, saving all your receipts, and learning which credits and deductions you can take.
With the deadline for filing taxes being extended again, it may seem like a good excuse to delay processing your tax returns until the last minute in case the IRS announces another deadline extension. However, it would be a shame to postpone filing your taxes, particularly when there are benefits to filing early, such as:
The IRS reports the filing data and statistics each year, revealing that taxpayers that file early receive significantly larger refunds. On average, those who filed later got about $400 less than those who filed before the deadline. The logic behind this may be the tendency for people to miss out on valuable deductions or credits when they wait to file their taxes at the last minute and end up making mistakes.
Waiting until the last possible minute is one thing; needing to file an extension because you need more time to sort your finances is another. Waiting until the deadline is acceptable; however, filing an extension and missing it will result in interests and penalties on your outstanding tax debts. You can avoid this by making up your deadline; set a date before the actual deadline and commit to it.
Tax season stress and burnout are actual conditions that psychologists have observed to take an emotional toll on tax-paying citizens. After all, the IRS are authority figures, and being audited by them can lead to hefty fines and other charges. By processing and filing your taxes early, you can eliminate deadline stress and relax when Tax Day rolls around.
Statistically, tax fraudsters file fake returns using stolen Social Security numbers early in the tax season. If you are the actual owner of the Social Security number and legitimate taxpayer, you may wait until the deadline to file and be shocked when it’s rejected. The protracted process can take months because it involves affidavits, supporting documents, and paper returns – resulting in not just stress but also receiving your refund later than you’d hoped.
Case study: Retired Couple With Old Unpaid IRS DebtA husband and wife, both retired and in their late 70s, had very old unpaid liability due to the IRS in the approximate amount of one million dollars. The value of their marital assets, including their home and remaining retirement funds, was approximately one million dollars, meaning that they were not eligible for an Offer in Compromise based upon Doubt as to Collectibility. The husband’s health was below average for a man of his age and it was clear that he would never work again. The wife’s health was terrible. She was blind, wheelchair-bound, a double amputee and her kidneys were failing. We filed an Offer in Compromise on behalf of our taxpayers based upon Effective Tax Administration or Exceptional Circumstances. We pointed out that although the taxpayers had the theoretical ability to pay the liability in full, doing so would render them unable to pay for their basic needs such as housing, food, clothing and medical care. Surprisingly, the IRS rejected the taxpayers’ Offer in Compromise, preferring to take a substantially larger portion of the remaining assets despite their age and health. As shocking as this story sounds, there is still a happy ending. We were able to negotiate a reasonable lump sum payment to the IRS along with an installment agreement that enabled our taxpayers to live the remainder of their lives in comfort and security.
File early and receive your tax refund early. The IRS states that they issue 9 out of 10 tax refunds in no more than 21 days from the day they are filed using the e-file with direct deposit option. As mentioned, fraudsters also file early to claim the refunds before the IRS realizes their filing was phony when the legitimate taxpayer files the same Social Security number. Therefore, by filing early and getting your refund faster, you’d be helping prevent criminals from stealing.
Just because you can wait until Tax Day to file your taxes, it doesn’t mean you should. If you have any questions on other kinds of support you can get when it comes to your taxes, we invite you to contact the IRS Trouble Solvers if you find yourself in trouble with the IRS.